IPO returns analysis. ASX listed IPOs since 2013 (minimum offer size of A$100m)

Transcription

1 IPO returns analysis ASX listed IPOs since 2013 (minimum offer size of A$100m) February 2015

2 Contents Sections 1 Executive summary 2 2 Sample space overview 8 3 Average returns analysis ( ) 12 4 Industry returns 20 5 Weighted Average Returns Analysis 23 Appendices A Supporting information 29 1

3 1. Executive summary

4 1.1 Executive summary 1. Executive summary 1 2 Introduction The Australian Private Equity and Venture Capital Association (AVCAL), in association with Rothschild, has analysed the returns of private equity (PE) backed IPOs on the ASX since 2013 in order to inform members and the market This report is the second annual report which Rothschild and AVCAL have conducted since the re-opening of the IPO market in 2013 (following a general hiatus of ASX listed IPOs since 2007), and follows a large number of IPOs listing in calendar year 2014 Analysis has been undertaken of the 49 PE backed and non-pe backed IPOs which listed on the ASX during 2013 and 2014 with an offer size of at least A$100m Performance of IPOs during this time has been against a backdrop of periods of volatility in domestic and international equity markets, particularly during the fourth quarter of 2014 Returns of PE backed IPOs have been compared to non-pe backed IPOs and relevant market indices over different time periods Returns analysis has focussed on share price performance only, up to 31 December 2014 (does not include ordinary dividends) Returns have been assessed utilising average returns and weighted average returns Average return analysis Assumes an equal dollar investment in each IPO (say $10,000), consistent with how a retail investor may consider participating in new IPOs Results have been evaluated over various time periods and per industry classification Weighted average returns analysis Individual company returns have been weighted by market capitalisation at IPO to provide a weighted measure of PE backed versus non-pe backed IPO returns since listing Results have been evaluated over various time periods and per industry classification Results for both PE and non-pe samples were also compared to an equivalent weighted exposure throughout time in the S&P/ASX Small Industrials Index (the benchmark small/mid-cap index) Provides a direct comparison between PE backed / non-pe backed IPO investment and index investment 3

5 1.2 Executive summary (cont d) 1. Executive summary 3 Results show that PE backed IPOs have outperformed non-pe backed IPOs since the re-opening of the Australian IPO market in 2013, although PE backed IPOs in 2014 underperformed non-pe backed IPOs PE backed IPOs since 2013 have returned 10.3% on an average basis and 16.9% on a weighted average basis, outperforming non-pe backed IPOs by ~3% and ~4%, respectively Non-PE backed IPOs in 2014 have returned 13.7% on an average basis and 18.1% on a weighted average basis, outperforming PE backed IPOs by ~7% and ~5% respectively Both PE backed and non-pe backed IPOs (listing since 2013 and, separately, in 2014) have significantly outperformed equivalent investments in the benchmark Small Industrials Index Investors who chose to allocate funds to IPOs (greater than or equal to A$100m offer size since the IPO market reopened in 2013) would have achieved significant outperformance in their portfolios compared to an equivalent investment at the same time in the benchmark S&P/ASX Small Industrials Index (XSI) PE backed and non-pe backed IPOs listing since 2013 achieved weighted average returns of 16.9% and 12.9% to 31 December 2014, compared to the returns of the Small Industrials Index of approximately 1.5% PE backed and non-pe backed IPOs listing since 2014 achieved weighted average returns of 13.4% and 18.1% to 31 December 2014, outperforming the returns of the Small Industrials Index of approximately 0.4% In 74% of PE backed IPOs, PE firms retained a residual shareholding post listing, with an average ownership level of more than 20%, providing strong alignment between incoming and existing shareholders Returns of PE backed and non-pe backed IPOs were broadly consistent in the early period post listing PE backed IPOs outperformed non-pe backed IPOs over 1 week and 1 month post listing on a weighted average basis, though slightly underperformed on an average basis Over 1 year post listing, PE backed IPOs strongly outperformed non-pe backed IPOs Since 2013, PE backed IPOs have accounted for 3 of the top 5 performing IPOs, including the best performing IPO over A$100m offer size 4

6 1.3 Executive summary Summary returns for 2014, 2013 and since listing 1. Executive summary Average IPO returns Weighted average IPO returns 1 Number of IPOs Returns since listing (2013 and 2014 IPOs) 7.0% 10.3% Returns since listing (2013 and 2014 IPOs) 12.9% 16.9% Number of 2013 and 2014 IPOs returns (2014 IPOs only) 6.6% 13.7% 2014 returns (2014 IPOs only) 13.4% 18.1% Number of 2014 IPOs returns (2013 IPOs only) 1.4% 19.6% (3.5)% 2013 returns (2013 IPOs only) 23.2% Number of 2013 IPOs 6 12 (10)% 0% 10% 20% 30% Non-PE backed PE backed (10)% 0% 10% 20% 30% Non-PE backed PE backed Non-PE backed PE backed 5 Share prices as at 31 December 2014 (Source: IRESS) Note 1 Weighted average returns calculated as sum of (absolute returns x IPO market capitalisation for each IPO) / total IPO market capitalisation of PE or non-pe backed sample

7 1. Executive summary 1.4 Executive summary Summary returns over various time periods post IPO Average IPO returns Weighted average IPO returns 1 Number of IPOs 1 year performance (2013 and 2014 IPOs) (8.2)% 17.7% 1 year performance (2013 and 2014 IPOs) (2.5)% 6.0% Number of 2013 and 2014 IPOs month performance (2013 and 2014 IPOs) 6.1% 5.6% 1 month performance (2013 and 2014 IPOs) 6.4% 7.6% Number of 2013 and 2014 IPOs week performance (2013 and 2014 IPOs) 5.6% 3.9% 1 week performance (2013 and 2014 IPOs) 3.9% 6.4% Number of 2013 and 2014 IPOs (10)% 0% 10% 20% 30% Non-PE backed PE backed (10)% 0% 10% 20% Non-PE backed PE backed Non-PE backed PE backed 6 Share prices as at 31 December 2014 (Source: IRESS) Note 1 Weighted average returns calculated as sum of (absolute returns x IPO market capitalisation for each IPO) / total IPO market capitalisation of PE or non-pe backed sample

8 1.5 Executive summary Weighted returns against the Small Industrials Index 1. Executive summary Note 1 Weighted average returns calculated as sum of (absolute returns x IPO market capitalisation for each IPO) / total IPO market capitalisation of PE or non-pe backed sample 2 Small Industrials Index returns calculated by making an equivalent dollar investment as was invested in the respective PE backed or non-pe backed IPOs Weighted average IPO returns for 2013 and 2014 IPOs since listing 1, May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Weighted average IPO returns for 2014 IPOs since listing 1, Share prices as at 31 December 2014 (Source: IRESS) PE Index Non-PE Index XSI weighted to PE IPOs XSI weighted to non-pe IPOs 85 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 PE Index Non-PE Index XSI weighted to PE IPOs XSI weighted to non-pe IPOs Returns 16.9% 12.9% 1.5 % 1.4% Returns 18.1% 13.4% 0.4% 0.3% 7

9 2. Sample space overview

10 2. Sample space overview 2.1 Introduction 1 Selection criteria for the sample space of IPOs is as follows; ASX listed (including dual listings) 1 Dual listings have been incorporated at full offer size rather than only the component of the offer that is tradable on the ASX Listing date from 1 January 2013 to 31 December 2014 IPO offer size greater than or equal to A$100m Partly paid, instalment style listings have been excluded as have Listed Investment Companies ( LICs ) Partly paid instruments have been excluded due to a lack of comparability with both the PE and non-pe sample space as they are typically infrastructure-like or property assets seeking to provide investors with enhanced yield characteristics LICs have been excluded given they typically invest in domestic and global listed equities and lack comparability with both the PE and non-pe sample space 2 Returns assessment undertaken on share price performance Analysis considers share price returns only Ordinary dividends have not been included in the returns analysis 3 A complete list of these IPOs, including the excluded companies, is contained in Appendix A of this presentation Note 1 All dual listings were required to meet the size criteria for inclusion 9

11 2.2 Sample space overview Industry sector 1 composition by number of IPOs 2. Sample space overview Consumer Discretionary and Health Care IPOs dominated the PE backed dataset for 2013/2014 Real Estate and Consumer Discretionary IPOs led non-pe backed IPOs by number IPO activity was more pronounced in 2014, with 63% of IPOs by number and 68% by offer size IT 9% Health Care 22% Materials 4% PE backed IPOs Sector # of IPOs Financials 2 Industrials 3 Consumer Discretionary 9 Utilities 0 Materials 1 Energy 0 Consumer Staples 0 Health Care 5 IT 2 Telecom 1 Real Estate 0 Total 23 Non-PE backed IPOs Telecom Financials 4% Financials 9% 11% Industrials 13% Consumer Discretionary 39% Industrials 11% Consumer Health Care + = Discretionary 8% 23% Consumer Real Estate 27% Staples 4% Energy 4% Materials 4% Utilities 8% Sector # of IPOs Financials 3 Industrials 3 Consumer Discretionary 6 Utilities 2 Materials 1 Energy 1 Consumer Staples 1 Health Care 2 IT 0 Telecom 0 Real Estate 7 Total 26 Telecom 2% IT 4% Consumer Staples 2% Energy 2% Materials 4% All IPOs Real Estate 14% Health Care 15% Utilities 4% Financials 10% Industrials 12% Consumer Discretionary 31% Sector # of IPOs Financials 5 Industrials 6 Consumer Discretionary 15 Utilities 2 Materials 2 Energy 1 Consumer Staples 1 Health Care 7 IT 2 Telecom 1 Real Estate 7 Total 49 Source IRESS Notes 1 GICS Sector has been used to classify industry groups 2 Real Estate has been split out of the Financials sector using the GICS Industry Group Classification 10

12 2.3 Sample space overview Industry sector 1 composition by offer size 2 of IPOs 2. Sample space overview The non-pe backed sample is dominated by the large privatisations of Medibank Private and Mighty River Power The largest PE backed IPOs by value are Healthscope and Spotless The split by total offer size value between non- PE and PE was 60/40 The data sample equates to average IPO offer sizes of: ~A$420m for PE backed ~A$560m for non-pe backed PE backed IPOs IT 4% Health Care 39% Telecom 2% Materials 2% Financials 10% Industrials 16% Consumer Discretionary 27% Sector Offer size Financials 960 Industrials 1,517 Consumer Discretionary 2,574 Utilities 0 Materials 222 Energy 0 Consumer Staples 0 Health Care 3,758 IT 424 Telecom 150 Real Estate 0 Total 9,606 Consumer Staples 1% Energy 5% Health Care Non-PE backed IPOs 6% Real Estate 12% Financials 45% Materials + Utilities = 4% 14% Consumer Discretionary 10% Industrials 3% Sector Offer size Financials 6,596 Industrials 445 Consumer Discretionary 1,439 Utilities 2,095 Materials 649 Energy 742 Consumer Staples 132 Health Care 837 IT 0 Telecom 0 Real Estate 1,738 Total 14,673 Consumer Staples 0.5% Energy 3% Materials 4% Health Care 19% All IPOs Real Estate Telecom 7% 1% IT 2% Financials 31% Industrials Utilities 9% Consumer Discretionary 16% 8% Sector Offer size Financials 7,555 Industrials 1,962 Consumer Discretionary 4,014 Utilities 2,095 Materials 871 Energy 742 Consumer Staples 132 Health Care 4,595 IT 424 Telecom 150 Real Estate 1,738 Total 24, Source IRESS Notes 1 GICS Sector has been used to classify industry groups 2 Offer size in A$m. NZD denominated deals converted at the prevailing FX spot rate at the time of listing 3 Real Estate has been split out of the Financials sector using the GICS Industry Group Classification

13 3. Average returns analysis ( )

14 3. Average returns analysis ( ) 3.1 Overview 1 Average return analysis has been undertaken for both PE backed companies and non-pe backed companies Returns have been reviewed relative to IPO issue price IPO issue price is the institutional offer price and does not include any retail discounts Analysis assumes that an investor invests the same dollar value (e.g. A$10,000) into each IPO Share prices, including the IPO issue price, have been adjusted for changes in capital (for events such as rights issues and special dividends) as per the adjustment factors quoted on IRESS (note: Cover-More and Australian Industrial REIT were the only companies affected in the sample) Returns are calculated as the simple average of returns of the sample size tested over the defined time period As a result, this analysis does not consider factors (internal or external) which may be influencing share prices at different points in time during the period being analysed 2 Since 2013, PE backed IPOs have outperformed non-pe backed IPOs since listing, although non-pe backed IPOs in 2014 have outperformed PE backed IPOs PE backed IPOs have an average return of 10.3% since the IPO market re-opened in 2013 in comparison to a 7.0% average return for non-pe backed IPOs Non-PE backed IPOs in 2014 achieved an average return of 13.7%, outperforming PE backed IPOs which achieved an average return of 6.6% PE backed IPOs in 2013 and 2014 outperformed non-pe backed IPOs over a one year period since listing, though marginally underperformed non-pe backed IPOs on a 1 week and 1 month basis post listing 13

15 3.2 Total returns of all IPOs since listing Returns of all IPOs since 1 January Average returns analysis ( ) Simple average returns for PE backed IPOs since listing have outperformed non-pe backed IPOs by c.3% PE backed IPOs 100% 83.2% 80% 61.1% 60% 40% 41.5% 38.2% 37.4% 35.8% 20% 0% (20)% 29.5% 19.4% 13.5% 11.8% 3.6% 1.8% 0.6% Simple average: 10.3% (0.4)% (3.4)% (5.0)% (6.1)% (7.4)% (13.2)% (17.6)% (24.3)% PE backed IPOs represented 3 of the top 5 performers (40)% (30.5)% (33.0)% Non-PE backed IPOs 100% 80% 66.7% 60% 40% 20% 0% 48.0% 40.0% 37.4% 34.8% 32.3% 24.3% 19.2% 17.0% 14.5% 12.1% 11.2% 10.6% 10.1% 5.0% 3.0% 3.0% 1.1% 0.0% Simple average: 7.0% (20)% (1.5)% (5.6)% (6.8)% (8.4)% (14.0)% (40)% (60)% (80)% (100)% (84.0)%(88.1)% 14 Share prices as at 31 December 2014 (Source: IRESS)

16 3. Average returns analysis ( ) 3.3 Returns of 2014 IPOs Returns of 2014 IPOs from listing date to 31 Dec 2014 PE backed IPOs 1 Non-PE backed IPOs in 2014 achieved a 13.7% average return versus a 6.6% average return for PE backed IPOs 80% 60% 40% 20% 61.1% 37.4% 35.8% 29.5% 19.4% 13.5% 11.8% 3.6% 1.8% 0.6% Simple average: 6.6% 0% (20)% (40)% Mantra Group Ltd Burson Group isentia Group Healthscope Ltd Ltd Ltd Spotless Group Holdings Ltd SG Fleet Group Ltd Metro Performance Glass ooh!media Ltd Orion Health Group Ltd Asaleo Care Ltd (0.4)% APN Outdoor Group Ltd (6.1)% (7.4)% Speedcast International Ltd Aconex Ltd (13.2)% 3P Learning Ltd (17.6)% Estia Health Ltd (24.3)% Monash IVF Group Ltd (33.0)% PAS Group Ltd Non-PE backed IPOs 1 80% 70% 66.7% 60% 50% 40% 40.0% 37.4% 30% 20% 10% 17.0% 12.1% 11.2% 10.6% 5.0% 3.0% 3.0% 1.1% Simple average: 13.7% 0% (10)% (20)% IPH Ltd Genesis Energy Ltd Genworth Mortgage Insurance Lovisa Holdings Ltd Medibank Private Ltd Regis Healthcare Ltd Intueri Education Group Ltd Evolve Education Group Ltd Japara 360 Capital Healthcare Ltd Office Fund Huon Aquaculture Group Ltd (1.5)% GPT Metro Office Fund (5.6)% Simonds Group Ltd (8.4)% Smartgroup Corp Ltd Share prices as at 31 December 2014 (Source: IRESS) 15 Notes 1 Only includes companies which were listed during 2014

17 3. Average returns analysis ( ) 3.4 Returns of 2013 IPOs Returns of 2013 IPOs from listing date to 31 Dec 2013 PE backed IPOs 1 On average, PE backed IPOs significantly outperformed non-pe backed IPOs in 2013, with outperformance of c.18% 60% 50% 40% 30% 20% 10% 53.9% 52.8% 44.0% Simple average: 19.6% 0% (10)% (5.0)% (6.3)% (20)% (30)% Virtus Health Veda Group OzForex Dick Smith Cover-More iselect (21.9)% Non-PE backed IPOs 1 50% 43.9% 40% 30% 20% 10% 0% 8.5% 5.7% 5.1% 4.8% 1.5% Simple average: 1.4% (10)% (20)% (3.8)% (3.9)% (5.5)% (11.0)% (13.7)% (14.8)% (30)% Steadfast Vocation Z Energy National Storage REIT McAleese Australian Industrial REIT Hotel Property Investments Nine Entertainment Industria REIT Fund GDI Property Pact Group Mighty River Power 16 Share prices as at 31 December 2014 (Source: IRESS) Notes 1 Only includes companies which were listed during 2013

18 3. Average returns analysis ( ) 3.5 One year returns One year returns of 2013 and 2014 IPOs PE backed IPOs 1 On average, PE backed IPOs outperformed non-pe backed IPOs on a one year return basis by c.26%, returning ~18% for the period 100% 80% 60% 40% 20% 0% 82.4% 51.6% 18.0% 0.5% Simple average: 17.7% (20)% (40)% (60)% Veda Group Virtus Health OzForex Dick Smith Cover-More iselect (7.7)% (38.6)% Non-PE backed IPOs 1 60% 40% 40.8% 20% 0% (20)% 20.5% 13.9% 10.0% 10.0% 1.1% 0.5% (1.0)% (9.4)% (13.5)% Simple average: -8.2% (40)% (60)% (80)% 17 (100)% National Storage REIT Hotel Property Investments Share prices as at 31 December 2014 (Source: IRESS) Steadfast Z Energy Pact Group Australian Industrial REIT Notes 1 Returns have been calculated based on the price performance over 261 business days post listing Industria REIT Fund Nine Entertainment Mighty River Power (81.6)% (89.9)% GDI Property McAleese Vocation

19 3. Average returns analysis ( ) 3.6 One month returns One month returns of 2013 and 2014 IPOs PE backed IPOs 1 On average, non-pe backed IPOs have modestly outperformed PE backed IPOs on a one month return basis 60% 50% 40% 30% 20% 10% 0% (10)% (20)% 51.2% 27.8% 27.0% 16.2% 8.2% 8.1% 7.8% 7.7% 7.6% 7.5% 2.9% 0.4% 0.0% Simple average: 5.6% (3.2)% (5.0)% (5.9)% (8.6)% (11.6)% (13.0)% (13.5)% Non-PE backed IPOs 1 70% 60% 60.5% 50% 40% 30% 20% 10% 24.0% 23.0% 19.7% 16.7% 13.2% 12.7% 10.7% 9.4% 9.2% 6.6% 3.5% 2.0% 1.1% 0.2% Simple average: 6.1% 0% (10)% (20)% (3.3)% (3.4)% (4.0)% (5.5)% (6.4)% (9.4)% (9.7)% (11.2)% (13.0)% 18 Share prices as at 31 December 2014 (Source: IRESS) Notes 1 Returns have been calculated based on the price performance over 22 business days (equivalent to 31 calendar days) post listing

20 3. Average returns analysis ( ) 3.7 One week returns One week returns of 2013 and 2014 IPOs PE backed IPOs 1 On average, non-pe backed IPOs have modestly outperformed PE IPOs on a one week return basis 50% 40% 30% 20% 10% 0% (10)% (20)% (30)% 42.8% 37.5% 14.2% 13.9% 13.8% 13.2% 8.8% 6.7% 6.1% 5.5% 4.3% 2.9% 2.3% 1.0% Simple average: 3.9% (0.8)% (2.4)% (8.0)% (8.1)% (8.4)% (8.5)% (10.5)% (17.4)% (19.1)% Non-PE backed IPOs 1 70% 60% 59.5% 50% 40% 30% 20% 10% 28.5% 27.0% 16.8% 15.8% 15.0% 9.6% 7.8% 7.7% 7.0% 6.4% 5.5% 4.5% 2.4% 1.0% 0.0% Simple average: 5.6% 0% (10)% (0.9)% (1.1)% (2.5)% (5.6)% (8.3)% (8.8)% (9.0)% (10.1)% (11.5)% (11.8)% (20)% Share prices as at 31 December 2014 (Source: IRESS) 19 Notes 1 Returns have been calculated based on the price performance over 5 business days post listing

21 4. Industry returns

22 4.1 Industry returns comparison since listing Average returns for companies within the same sector 2,3 4. Industry returns Legend There was mixed performance among industry returns between PE backed and non-pe backed IPOs While sample sizes were comparable across industries, listings occurred over varying time periods PE backed IPOs performed most strongly in Industrials (Spotless, Veda, SG Fleet) while non-pe outperformed in Financials (Steadfast, Genworth, Medibank Private) Number of PE companies in the sector Number of non-pe companies in the sector 21 Simple average returns since listing date 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% (10.0)% (20.0)% 19.1% 28.1% 38.7% (8.6)% 2.3% (11.3)% 14.5% 11.8% Financials Industrials Consumer Discretionary Materials Health Care Share prices as at 31 December 2014 (Source: IRESS) PE backed Notes 1 Only Sectors included were those where there was both a PE and non-pe backed IPO 2 GICS Industry Group codes have been used to classify the companies 3 Returns are simple averages Non-PE backed 5.5% 7.1%

23 4.2 Industry returns comparison since listing Weighted average returns for companies within the same sector 2,3 4. Industry returns On weighted average returns, PE backed Health Care IPOs outperformed, while other weighted results were comparable to simple average returns Weighted average returns since listing date 50.0% 39.2% 40.0% 30.0% 20.0% 10.0% 15.2% 19.0% 3.3% 11.8% 14.5% 15.2% 8.6% 0.0% (10.0)% Legend Number of PE companies in the sector Number of non-pe companies in the sector 22 (20.0)% (16.2)% (13.0)% Financials Industrials Consumer Discretionary Materials Health Care Share prices as at 31 December 2014 (Source: IRESS) PE backed Notes 1 Only Sectors included were those where there was both a PE and non-pe backed IPO 2 GICS Industry Group codes have been used to classify the companies 3 Returns are weighted averages, weighted by IPO market capitalisation Non-PE backed

24 5. Weighted Average Returns Analysis

25 5.1 Introduction 5. Weighted Average Returns Analysis 1 PE backed and non-pe backed IPO weighted average returns analysis has been undertaken across various time periods, with indices constructed over two primary time periods: All IPOs since the IPO market re-opened (January 2013 to December 2014) All IPOs listed in 2014 (January 2014 to December 2014) Weighted average returns since listing over various discrete time periods have also been assessed 2 3 Weighted average analysis has been conducted to compare the aggregated returns of PE backed IPOs and non-pe backed IPOs against an equivalent investment in the S&P/ASX Small Industrials Index A PE backed index and non-pe backed index has been constructed assuming proportionate investment in each IPO based on that company s IPO market capitalisation (e.g. investment of 1% of each IPOs market capitalisation) Weighted average returns are then calculated as the daily aggregate market capitalisation divided by aggregate IPO market capitalisation for each portfolio, providing rolling daily portfolio returns across various time periods Daily market capitalisations for each company are calculated by multiplying the IPO market capitalisation by the daily share price returns Share price returns are adjusted for stock splits, rights issues, bonus issues etc. (per IRESS adjustment factor) S&P/ASX Small Industrials index has been used as the market benchmark for comparing returns as it offers a more directly comparable index with respect to the size and industry of the constituents (i.e. ex-resources, ex-banks) The constructed PE backed and non-pe backed indices represent the value of each portfolio at any point in time Weighted average analysis assumes the investment of a similar percentage of market capitalisation into every IPO Should an investor contribute $100 in one IPO and $200 in a second IPO (based on the proportional investment method outlined above), the portfolio investment of $300 is measured against the current market value of the portfolio on a daily basis For example, if returns since IPO are 20% on the first IPO and 10% on the second IPO, then the value of the portfolio has grown to $340 and the weighted portfolio return is 13.3% (versus a simple average return of 15%) Returns are then multiplied by a notional value of 100 for charting purposes 24

26 5.2 Introduction (cont.) 5. Weighted Average Returns Analysis 3 Weighted Small Industrials Indices were constructed to replicate the respective dollar investments in both the PE backed and non-pe backed IPO portfolios Separate Small Industrial Indices were calculated for both PE backed and non-pe backed IPOs by assuming an equivalent dollar investment in the S&P/ASX Small Industrials Index at the same time as the corresponding PE backed or non-pe backed IPO The dollar investment made in the S&P/ASX Small Industrials Index is then compounded by the daily returns of the index, creating a directly comparable market performance to that of PE backed and non-pe backed IPOs, with the same market exposure / investment timing The weighted Small Industrials Index return is then calculated as the daily market value of the investment in the Small Industrials Index divided by the initial investment value The value of the index was rebased to 100 for charting purposes 4 5 PE backed IPOs since 2013 have outperformed non-pe backed IPOs PE backed IPOs since 2013 have outperformed non-pe backed IPOs on a weighted average basis by ~4% PE backed IPOs listed in 2014 underperformed non-pe backed IPOs, although by a lesser amount than under an average basis PE backed IPOs also outperformed non-pe backed IPOs over a 1 week, 1 month, and 1 year basis Both PE backed and non-pe backed IPOs (listing since 2013 and, separately, in 2014) have significantly outperformed equivalent investments in the benchmark Small Industrials Index Investors who chose to allocate funds to IPOs (greater than or equal to A$100m offer size since the IPO market reopened in 2013) would have achieved significant outperformance in their portfolios compared to an equivalent investment at the same time in the benchmark S&P/ASX Small Industrials Index (XSI) PE backed and non-pe backed IPOs listing since 2013 achieved weighted average returns of 16.9% and 12.9% to 31 December 2014 compared to the returns of the Small Industrials Index of approximately 1.5% PE backed and non-pe backed IPOs listing since 2014 achieved weighted average returns of 13.4% and 18.1% to 31 December 2014 compared to the returns of the Small Industrials Index of approximately 0.4% In 74% of PE backed IPOs, PE firms retained a residual shareholding post listing, with an average ownership level of more than 20%, providing strong alignment between incoming and existing shareholders 25

27 5.3 Weighted average returns All IPOs in 2013 and Weighted Average Returns Analysis PE backed IPOs have outperformed both non-pe backed IPOs and the Small Industrials Index since 2013 on a weighted basis, returning 16.9% PE backed and non- PE backed IPOs have significantly outperformed their respective weighted Small Industrials Indices Index returns since , Returns 16.9% 12.9% 1.5% 1.4% Note 1 Weighted average returns calculated as sum of (absolute returns x IPO market capitalisation for each IPO) / total IPO market capitalisation of PE or non-pe backed sample 2 Small Industrials Index returns calculated by making an equivalent dollar investment as was invested in the respective PE backed or non-pe backed IPOs May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 PE Index Non-PE Index XSI weighted to PE IPOs XSI weighted to non-pe IPOs Share prices as at 31 December 2014 (Source: IRESS) 26

28 5.4 Weighted average returns All IPOs in Weighted Average Returns Analysis Non-PE backed IPOs have outperformed PE backed IPOs for those listings in 2014, returning 18.1% versus 13.4% Both PE backed and non-pe backed IPOs significantly outperformed their respective weighted Small Industrials Indices in 2014 Index performance since 2014 (only IPOs listed during 2014) 1, Returns 18.1% 13.4% % 0.3% Note 1 Weighted average returns calculated as sum of (absolute returns x IPO market capitalisation for each IPO) / total IPO market capitalisation of PE or non-pe backed sample 2 Small Industrials Index returns calculated by making an equivalent dollar investment as was invested in the respective PE backed or non-pe backed IPOs Mar-14 Apr-14 May-14 Jun-14 Jul-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 PE Index Non-PE Index XSI weighted to PE IPOs XSI weighted to non-pe IPOs Share prices as at 31 December 2014 (Source: IRESS) 27

29 5.5 Weighted average returns over various time periods Weighted average returns of all IPOs across various time periods 5. Weighted Average Returns Analysis PE backed IPOs have outperformed non-pe backed IPOs across the majority of analysed time frames, with the exception of returns for IPOs in 2014 Weighted average returns of PE backed and non-pe IPOs over various time periods 30% 23.2% 20% 18.1% 16.9% 12.9% 13.4% 10% 6.0% 6.4% 7.6% 3.9% 6.4% 0% (3.5%) (2.5%) (10)% Returns since listing (2013 and 2014 IPOs) 2014 returns (2014 IPOs only) 2013 returns (2013 IPOs only) 1 year performance (2013 and 2014 IPOs) 1 month performance (2013 and 2014 IPOs) 1 week performance (2013 and 2014 IPOs) PE backed Non-PE backed Share prices as at 31 December 2014 (Source: IRESS) 28

30 Appendix A. Supporting information

31 Appendix A. Supporting information A.1 Company index PE backed sample space PE backed companies Ticker Primary exchange Issuer Listing date Offer price (local currency) GICS sector Offer size (A$m) VRT Australia Virtus Health 11-Jun Health Care 339 ISU Australia iselect 24-Jun Consumer Discretionary 215 OFX Australia OzForex 11-Oct Financials 439 DSH Australia Dick Smith 4-Dec Consumer Discretionary 345 VED Australia Veda Group 5-Dec Industrials 341 CVO Australia Cover-More 19-Dec Financials 520 SGF Australia SG Fleet Group Ltd 4-Mar Industrials 189 BAP Australia Burson Group Ltd 24-Apr Consumer Discretionary 220 SPO Australia Spotless Group Holdings Ltd 23-May Industrials 987 ISD Australia isentia Group Ltd 5-Jun IT 284 PGR Australia PAS Group Ltd 16-Jun Consumer Discretionary 120 MTR Australia Mantra Group Ltd 20-Jun Consumer Discretionary 239 MVF Australia Monash IVF Group Ltd 26-Jun Health Care 316 AHY Australia Asaleo Care Ltd 27-Jun Consumer Discretionary 656 3PL Australia 3P Learning Ltd 9-Jul Consumer Discretionary 283 HSO Australia Healthscope Ltd 28-Jul Health Care 2,255 MPG.NZ New Zealand Metro Performance Glass 30-Jul Materials 222 SDA Australia Speedcast International Ltd 12-Aug Telecom 150 APO Australia APN Outdoor Group Ltd 11-Nov Consumer Discretionary 329 OHE.NZ New Zealand Orion Health Group Ltd 26-Nov Health Care 124 EHE Australia Estia Health Ltd 5-Dec Health Care 725 ACX Australia Aconex Ltd 9-Dec IT 140 OML Australia ooh!media Ltd 17-Dec Consumer Discretionary 167 9,606 Source Dealogic, IRESS 30

32 Appendix A. Supporting information A.2 Company index Non-PE backed sample space Non-PE backed companies Ticker Primary exchange Issuer Listing date Offer price (local currency) GICS sector Offer size (A$m) MRP.NZ New Zealand Mighty River Power 10-May Utilities 1,397 SDF Australia Steadfast 2-Aug Financials 334 ZEL.NZ New Zealand Z Energy 19-Aug Energy 742 ANI Australia Australian Industrial REIT 21-Oct Real Estate 129 MCS Australia McAleese 28-Nov Industrials 166 IDR Australia Industria REIT Fund 3-Dec Real Estate 199 NEC Australia Nine Entertainment 6-Dec Consumer Discretionary 637 VET Australia Vocation 9-Dec Consumer Discretionary 253 HPI Australia Hotel Property Investments 10-Dec Real Estate 279 GDI Australia GDI Property 17-Dec Real Estate 568 PGH Australia Pact Group 17-Dec Materials 649 NSR Australia National Storage REIT 19-Dec Real Estate 183 GNE.NZ New Zealand Genesis Energy Ltd 17-Apr Utilities 698 JHC Australia Japara Healthcare Ltd 17-Apr Health Care 351 TOF Australia 360 Capital Office Fund 24-Apr Real Estate 125 GMA Australia Genworth Mortgage Insurance 20-May Financials 583 IQE.NZ New Zealand Intueri Education Group Ltd 23-May Consumer Discretionary 163 SIQ Australia Smartgroup Corp Ltd 2-Jul Industrials 113 REG Australia Regis Healthcare Ltd 7-Oct Health Care 486 HUO Australia Huon Aquaculture Group Ltd 23-Oct Consumer Staples 132 GMF Australia GPT Metro Office Fund 24-Oct Real Estate 255 SIO Australia Simonds Group Ltd 17-Nov Consumer Discretionary 161 IPH Australia IPH Ltd 19-Nov Industrials 166 MPL Australia Medibank Private Ltd 25-Nov Financials 5,679 EVO.NZ New Zealand Evolve Education Group Ltd 5-Dec Consumer Discretionary 123 LOV Australia Lovisa Holdings Ltd 18-Dec Consumer Discretionary ,673 Source Dealogic, IRESS 31

33 Appendix A. Supporting information A.3 Company index Excluded IPOs Excluded IPOs - Partly paid IPOs and Listed Investment Companies ( LICs ) Ticker Primary exchange Issuer Listing date Offer price (local currency) GICS sector MELCA.NZ New Zealand Meridian Energy 29-Oct Utilities 1,639 Listed Investment Companies Ticker Primary exchange Issuer Listing date Offer price (local currency) GICS sector PGF Australia PM Capital Global Opportunities Fund 12-Dec Financials 174 PIC Australia Perpetual Equity Investment Company 18-Dec Financials 250 QVE Australia QV Equities Limited 22-Aug Financials 185 Offer size (A$m) Offer size (A$m) Source Dealogic, IRESS, Datanalysis 32

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